Value of farmland is now outstripping gold

Lack of supply in the local market is driving prices up with experts predicting that growth in the value of Yorkshire farms will "comfortably outstrip" inflation by the end of the year.

The rate of growth is matching and in some cases beating the value of gold – a commodity traditionally seen as a safe bet for investment during times of economic uncertainty.

Research from Savills showed farmland supply in the North to be down by 33 per cent in the first quarter of 2010 with Andrew Black from the organisation's York offices saying that values have risen for all land types.

"Good quality land in high demand areas is now fetching up to 8,000 per acre on the back of strong demand," he said.

"Whilst poorer land in less popular locations is nearer 4,500 per acre. Sales agreed in the North so far suggest that the market remains firm, with competitive interest received on good blocks of bare land.

"The cold start to the year delayed some marketing decisions and there is now evidence of land coming forward to the market, but no reason to suggest that volume levels will be significantly different to those in recent years. Purchasers are looking on a national basis for well equipped farms of any size."

Ian Bailey, head of Savills rural research, added that interest from non-farmers was tentatively increasing too – with the combined low interest rate environment leading him to believe annual growth to be up to six per cent.

Cash buyers now represent over 60 per cent of applicants registered with Savills to buy farmland, with most of these applicants looking to purchase a property of up to 500 acres.

The view was backed up by Sam Tydeman of rural property experts Smith Gore.

Mr Tydeman, of the firm's offices in York, said: "Bare land sales in Yorkshire and the Humber are doing well when in good locations. Enquiries for whole farms remain good but there is a real lack of supply. Investors are back in the market for reasonable-sized blocks of arable land. As always, local farmers remain the principal buyers."

He estimated farmland values had increased by two per cent between January and March this year with de-mand remaining very strong due to chronic undersupply.

Gerald FitzGerald, head of property investment and valuations with the firm, said: "Demand for land as an investment remains strong but there have been very few sizable investment sales."

He said most sales in his experience were to private individuals looking to buy for tax reasons – and that most had been below the 1m level.

CW 8/5/10